Apple is the last FAANG standing, and its earnings report next week could go a long way in determining whether the stock market recovers or slides further.
As bad as this year has been for the stock market, it has been even worse for the original FAANGs. While the
has fallen by 10.4% in 2022,
Facebook Parent metaplatforms (ticker: FB) have plummeted 45.3%,
amazon.com (AMZN) has fallen by 13.4%,
Netflix (NFLX) is down 64.2% and Google’s parent company
Alphabet (GOOGL) has fallen by 17.4%.
The enlarged FAANMGs have not fared much better, with
Microsoft (MSFT) down 18.5%, and only Apple (AAPL) down 8.9% in 2022, outperforming the S&P 500.
To say that this is bad news for the stock market is an understatement. In every year since 2014, those six stocks have added more to S&P 500 returns than their weight in the index would imply, according to data from Bespoke Investment Group. They also contributed more to market earnings than the rest of the stock market combined in three of those eight years.
That changed in 2022, with Meta, Amazon, Netflix, Microsoft, Apple and Alphabet accounting for 3.9%, or about half, of the S&P 500’s 7.8% decline through Thursday’s close. “For years, a select group of mega-cap stocks underpinned the broader market with strong outperformance and rising weights,” writes Bespoke’s George Pearkes. “However, in 2022, those same stocks are now a huge drag on the index.”
Five of those six stocks will have a chance to show that the market has been too bearish when they report earnings next week. Alphabet is scheduled to report after the close on Tuesday, as is Microsoft, followed by Meta on Wednesday afternoon, then Apple and Amazon after the close on Thursday. Netflix, of course, has already sniffed out earnings, sending shares down 37% last week. The less said about Meta, the better.
Don’t expect big things from Microsoft, Amazon and Alphabet. All three are trading below their 40-week moving averages, suggesting more downside lies ahead, writes John Roque, head of technical strategy at 22V Research. “The charts continue to tell us that they are going to move sharply lower and…investors [aren’t] particularly prepared for that to happen,” explains Roque, who sees Alphabet and Amazon reaching $2,000, with Microsoft potentially falling to $225.
That leaves the market’s hopes on Apple, the biggest of the tech giants. Unlike the rest of the big tech companies, Apple shares are still trading above their 40-week moving average, notes Roque, while Mark Newton, head of technical strategy at Fundstrat Global Advisors, also highlighted Apple’s relative strength. and the impact it has on stocks. market and in
exchange-traded fund (QQQ).
Fundamental analysts are also generally bullish on Apple. The company is expected to report a fiscal second quarter profit of $1.43 per share, up 2.1% from $1.40 a year ago, on sales of $94.1 billion, up 5% from $89.6 billion. . Many analysts believe he will be able to top those numbers despite numerous headwinds, including supply chain issues and shutdowns in China.
Strong growth in Apple’s highly profitable services business should also help ease concerns, writes Deutsche Bank analyst Sidney Ho: “We think AAPL shares are a good hiding spot in this volatile market.”
Investors better hope so. Without Apple, the market crash will only get worse.
write to Ben Levisohn at Ben.Levisohn@barrons.com